S&P changes Kilroy view to negative

S&P said it revised its outlook for Kilroy Realty Corp. to negative from stable and affirmed all its ratings, including the BBB+ issuer rating.

“We expect Kilroy's operating performance to remain challenged amid secular headwinds and weaker market fundamentals on the West Coast, as we believe lower retention and office utilization will pressure the portfolio. As of Sept. 30, 2023, the company's portfolio was 86.2% occupied, an approximately 450-basis-point drop from one year prior. We believe a heightened supply of class A vacant offices and subpar office utilization in KRC's West Coast markets is driving poorer retention and threatens to pressure occupancy further over the next few years,” S&P said in a statement.

The agency said the weaker outlook reflects the view that KRC’s S&P Global Ratings-adjusted debt to EBITDA will weaken moderately to the mid-6x area over the next two years.

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